KNOC sticks to $2.6 billion Dana bid
SEOUL (Reuters) - State-run Korea National Oil Corp ruled out raising its $2.6 billion hostile bid for Dana Petroleum after winning the backing of almost half the UK oil explorer's shareholders but needs more deals to reach its output goals.
South Korea has given the oil company a $6.5 billion warchest this year to compete with energy-hungry Asian state firms in a race to secure supplies and to cut Asia's No.4 economy's almost total dependence on imported oil.
KNOC Chief Executive Kang Young-won said they would not consider raising the bid to win approval from Dana's board, a stance the company later reiterated in a statement.
"We believe our offer values Dana fairly and fully and have no plan to consider raising it," Kang told Reuters on the sidelines of a forum of Asian state oil companies in Seoul.
The Dana deal, if completed, will boost KNOC's production by 50,000 barrels per day (bpd) and move it a step closer to meeting its target of 300,000 bpd by 2012 but still leaves it short of 120,000 bpd.
Analysts say it will likely meet this gap with a dual strategy of developing new fields and acquisitions.
"You need to compare the valuation between developing oilfields and M&A activities, and the valuation of M&A activity is much more attractive given low share prices," Sean Hwang, an analyst at Mirae Asset Securities.
"KNOC would continue to expand by acquiring companies which own oilfields or have skills for oil development."
KNOC's chief executive is not giving anything away.
Kang, best known for hitting the jackpot with a $5.6 billion Myanmar gas development deal for Daewoo International <047050.KS> while serving as chief executive there, said his focus remained on Aberdeen-based Dana.
"We are looking worldwide for acquisitions but at the moment my focus is really on pulling this Dana deal through," he said.
KNOC launched a hostile 1,800 pence a share offer, worth 1.67 billion pounds ($2.6 billion), on Friday after it failed to convince Dana's board of its takeover proposal.
The company is seeking the backing of 90 percent of Dana shareholders to make a compulsory acquisition of the remaining shares. It is also buying out Dana's convertible bondholders to give a total deal value of 1.87 billion pounds.
OUTGUNNED
Chinese and other firms have so far outgunned KNOC, which is involved in oil exploration and storage, in bigger takeover battles.
Investors have said with two months having passed since KNOC's approach, Dana needed to quickly produce another bidder or other material reasons why the offer undervalued the company.
The Financial Times reported on Monday that the Dana board plans to use its interim results later this week as a platform to stress value and hoped the attraction of a board seal of approval would lure KNOC back to the negotiating table with a higher offer.
Dana, which has hinted that it is in talks about a major acquisition, is in advanced talks to buy UK North Seas fields from Canada's Suncor Energy , according to sources close the matter.
The KNOC/Dana deal, if agreed, would be the biggest hostile acquisition by a South Korean firm and biggest ever deal for KNOC, which purchased Canadian group Harvest Energy last October for $1.7 billion.
Kang has been determined in boosting the profile of KNOC and grow it into a major state oil firm to rival the likes of China's CNOOC <0883.HK> and Sinopec <0386.HK>.
Since he took the top job in KNOC in 2008, he more than doubled South Korea's oil self-sufficiency to around 9 percent. (Additional reporting by Ju-min Park; Editing by Jonathan Hopfner and Valerie Lee)